China and the World of Business • China Business and the World

Month: August 2006

Interrupting an incredibly challenging morning, I find myself embroiled in an e-mail exchange with Perry Wu from ChinaTechNews.com over this whole WVAS business. Perry is still of the opinion that WVAS providers in China are as doomed trailer parks in Tornado Alley, while I see somewhere between three and six WVAS providers potentially thriving following a round of consolidation and the issuance of 3G licenses.

(And, by the way, I prefer wireless VASPs as an abbreviation. It’s easier to say and it sounds like my great-grandmother referring to the people in Pasadena who wouldn’t let people us join their clubs.)

The reason I say “potentially” thriving is because the only way they’re going to trump the power of – and competition from – the operators is by stepping up and creating bouquets of must-have services, especially for 3G networks.

One reader – rather defensively – recently asked if I’d suggest a few such services, as they felt the services the wireless VASPs are offering are “must have” services.

So here is my current – but not definitive – list of what I would say are services people would pay for.

Consumer Services

1. PunterPhone – A Real-Time Stock Portfolio system offering domestic markets with an add-on service to permit real-time share trading, thus liberating legions of Chinese day traders from their desks or dingy foyers. (Subscription)

2. FlightCheck – Flight arrival, departure, status, and gate information from the Beijing (or other regional) airport authority. For professional drivers, this would help eliminate the unsavory choice between paying for airport parking or parking along the side of the airport freeway waiting to get a really fat ticket. For drivers making regular trips, this service would be superb – especially with updates by SMS every 10 minutes, or real-time on 3G. (Subscription with support from ads from travel agents and airlines)

3. Official Airline Guide-Mobile Edition and mTicket – in alliance with a large travel agent, allow users to scan flight schedules and order e-tickets to be sent by SMS to a mobile phone. (Subscription plus commission on ticket sales, plus ad revenue)

4. MovieGuide – with trailers, reviews, showtimes, locations, and m-ticketing. Yeah, there are only 3000 cinemas in China, but that’s set to grow, and more people would go to movies if they had this information close at hand. (Commission on ticket sales and ad revenue)

5. Mobile Yellow Pages – let’s face it, it’s well past time that we had a constantly updated guide to businesses in a given city. It would be a huge money-maker (via ads) for the wireless VASP and the operator. If the Donnelly people were smart, they’d build the business here – they already know how to sell the ads, and they could hook it up with a printed version. (Ad supported, possible click-through revenue stream)

5a. Mobile Yellow Pages English Edition – Xianzai or THAT’s could brand this. How many times have I been looking for a restaurant and cursed the fact I didn’t have access to Xianzai or have a copy of THAT’s in my bag? (Ad revenues with click-through)

6. Zagat Mobile – A dynamically updated guide to the better restaurants of all of China’s cities. Defaults to the city you are in, but you can switch to other cities based on subscription options. (Annual subscription)

7. Fodor’s Mobile/Lonely Planet Mobile – Phone based guides to the city or country of your choice, with in depth information on locations updated by guide editors AND moderated input from users. (One-time purchase/annual subscription)

8. Audiobooks – If you can do music, you can do audiobooks, and China’s self-improvement wave is only just beginning to form. Business, personal finance, memoirs, and fiction should do well here. (One-time purchase)

9. TrafficWatch with FastPath – Despite the proliferation of ring-roads and eight-lane arteries, traffic is getting so bad in many cities (Beijing worst of all) that one wag I spoke to is starting to call Chinese cities “construction sites surrounded by parking lots.” Yes, there are too many cars for our wagon roads, but if people had a better way to know what they were looking at on the roads, life would get a lot easier. TrafficWatch would not only show those areas where backups and gridlock were occuring, it could give estimated transit times from one point to another. FastPath would be an add-on service designed to calculate which route to your destination (based on current conditions and recorded patterns) that would give you the quickest ride. Maybe it would be the road you’re on, but at least you’d know. (Annual subscription)

10. mToll – Ever envy those Army and Wujing vehicles that whisk past the tollbooths without so much as tapping on the brakes? mToll would use a cellular signal (made possible by GPS and 3G’s “always connected” feature) to make an automatic payment 100-200 meters before you reached the gate. If it didn’t work, you would have time to slow. Otherwise – go right through. No more fumbling for change, just a monthly add-on to your cellular bill. (Phone-bill add-on)

11. mTransit – The inexorable privatization of the bus and transit lines in China is going to put mounting pressure on those operations to start doing things more efficiently. The first candidates to go – all of those ladies taking money and tearing tickets. Automating rapid transit will certainly mean automated ticket machines, but they should mean multi-modal transit passes (akin to Hong Kong’s Octopus Card). Putting the pass information on the phone’s SIM card rather than producing and selling cards – especially using a contactless system, makes great economic sense, and it’s one thing less to worry about sticking in your pocket before going out. (Monthly or per-use pre-pay)

12. Homecheck – For people who want to make sure the maid hasn’t breached the safe, or just check on the kids, the service sends a live video signal from a password-accessed web camera to the phone’s screen. (Monthly subscription)

13. mBidder (eBay & Taobao) – Auction sites are getting hotter, and Chinese consumers won’t want to sit around at their desks and watch their bids. The solution – a mobile application that monitors their bids and allows them to bid as needed. (Monthly subscription or per-transaction).

There is a separate list of enterprise services, as well. But you get the point.

We’ve never been bashful here in the Hutong about using Lenovo as a punching bag. Frankly, the only reason we don’t do it more is because sometimes it’s just too easy.

So it’s only fair when we catch Lenovo doing something really smart that we give them credit.

And they’ve done something really smart.

After suggesting at one point it would drop support for Linux, Lenovo has gone in the other direction, first publicly committing itself to Linux on the lap, then making itself the first among the majors to actually announce a front-line laptop with Linux pre-loaded as the primary OS at LinuxWorld today.

For a very long time, all of the major PC manufacturers have been hesitant to promote the fact that they sell machines with Linux pre-loaded, and many have only offered Linux when a request came from a major customer. I had to do a search of the Dell website before I could find anything that offered a Linux pre-load, and all I could find was servers and workstations. Want a regular desktop or notebook with WIndows? Oh, well.

Now, I’ll cop to being an enthusiastic Linux Noobie, even though Mac OSX is my first-line operating system. But my reasoning for recognizing Lenovo’s smarts goes beyond some quasi-religious belief in Open Source.

There’s Gold In Them Thar Hills

This is a clear bid by Lenovo to capture the small- and medium-sized business (SMB) market in the US by doing something different that offers to salve some raw nerves.

Microsoft has been increasingly aggressive about the way it “works with” SMBs as a part of the Microsoft Software Asset Management program. Redmond’s actions under this program would seem to indicate that their idea of IPR protection is using the threat of legal mayhem to intimidate CIOs and gain direct access to corporate computer systems.

Some companies might be okay with that. I sure as hell wouldn’t be, and I’m starting to hear about a growing number of CIOs who are asking themselves whether it’s worth it to deal with the hassle, the costs, the intimidation.

A Linux-based ThinkPad is just the kind of product a CIO would buy to evaluate the viability of using Linux on the desktop in a whole range of areas in the enterprise. Sure, there are some businesses it will never be right for, but there are a lot of companies and educational environments for which Linux would be more than adequate, and using a ThinkPad with Linux on it as an ice-breaker and an experimental machine is spot on.

Fons is quoting the Shanghai Daily quoting the prognosticators at Norson Telecom Consulting that 3G licenses will not be issued until the summer of 2007.

Okay class, new exercise.

1. Buy a copy of Samuel Beckett’s play Waiting for Godot.

2. Cross out the word “Godot” everywhere in the play, replacing it with “3G in China.”

The ugly truth is that the window of opportunity for 3G in China may be closing while we wait for the guys at Datang and Siemens to make TD-SCDMA market ready.

Over the next two years we’re going to start hearing more about fourth-generation (4G) mobile technologies, and while neither of the current offerings (WiMax and OFDM) look ready to upgrade/replace cellular, there is no lack of companies trying to come up with order-of-magnitude improvements over 3G. Indeed, Sprint is already going to give WiMax a go.

At what point will China’s carriers simply say “bag it. We’ve waited this long, we’re waiting for The Next Thing?”

If nothing else, Rebecca MacKinnon has done a superlative job in pulling together into a single volume a treatment of the issue of Internet censorship in China as allegedly assisted by major U.S. companies, specifically Yahoo!, Microsoft, Google, and Skype. And for that, all of us should be grateful, because it provides us all with an opportunity to evaluate the position taken by activists working to change the behavior of these companies.

If for no other reason, this is a work that must be read and considered by everyone with an interest in the issues. Ms. MacKinnon is never bashful about stating her position or that of the publisher of the report, and there is no attempt to balance the discussion, but frankly I wouldn’t expect that. This is an advocacy document, not a piece of journalism, and it’s a damned good piece of advocacy.

To her credit, the report is a good read, and she articulates the positions more clearly than most have in the past. Frankly, I’m in general agreement with part of her premise – that there is more companies can and should be doing about this issue. After that, however, I’m afraid we part ways.

I have two major issues with the report that I think draw from its credibility and need to be addressed.

Simple Recommendations. Or, Not…

First is the contention made in the executive summary that:

“Human Rights Watch does not believe that the choice for companies is to either continue current practices or to leave China. Rather, we believe companies can and should make ethical choices about what specific products and services they will provide to the Chinese people––and the manner in which they are provided––without playing a pro-active role in censorship or collaborating in repression.”

In the cases of none of the four companies singled out in the report are specific recommendations made about which “specific products and services” should or should not be offered. What is provided at the end of the report is a series of seven recommendations to Internet companies operating in China, which boil down to:

1. Lobby the Chinese government to end censorship of the Internet. (See my next point below)

2. Refuse to participate in or facilitate infringements of the right to free expression, information, privacy, association, or internationally recognized human rights.

3. Never turn over personal user information if it could be used to prosecute a user. To ensure this happens, pull your servers with this data out of China.

4. Never censor any material unless required to do so in writing. Stop any proactive effort immediately.

5. Use all legal means to resist demands for censorship.

6. Document all censorship cases

7. Encrypt all email.

All of which sounds perfectly reasonable. What never happens in the course of the report is an analysis of whether or not it is possible to follow these practices and be allowed to operate in China. With all of the resources available to her, Ms. MacKinnon and her assistants never take the time to analyze with the kind of microscope an investment analyst would use is whether or not it is actually possible for Microsoft, Google, Yahoo! and Skype to do business in China under these requirements.

So We Lose a Few Internet Companies. We Have More.

“The display of politically objectionable content can result in reprimands to company management and employees from the MII, the State Council Information Office, the Communist Party’s Propaganda Department, and/or various state security organs, accompanied by warnings that insufficient controls will result in revocation of the company’s license.”

A somewhat knowledgeable reader can see the issue quite clearly – HRW requires that Internet companies refuse to “participate in or facilitate” infringements on free speech. And yet the report itself acknowledges that this kind of behavior could result in the revocation of a business license.

The question, of course, is whether the government would actually shut down these companies. Unfortunately the only way to test that is to have one or more companies step up and actually operate according to HRW’s recommendations. Since nobody wants to be the sacrificial chicken, Ms. MacKinnon proposes the modern equivalent of Russia’s political kommissars standing behind ranks of soldiers ordered into battle with orders to shoot if they try to retreat. She proposes legislation to force companies to challenge the will of the Chinese government.

(Worse, she suggests that U.S. companies would only be able to hand over user data to the Chinese government in cases determined acceptable by the U.S. Department of Justice. Under no circumstances would the Chinese government find this acceptable – it is redolent of the sort of extra-territoriality provisions forced on the Chinese during the period of unequal treaties and would invite an unequivocal response.)

Here is the question: how long would any Internet company, Chinese or foreign, be allowed to operate in China if it encrypted all email, refused to turn over personal information, moved its servers offshore, and demanded a writ each time it had to block a site or filter a word?

Does anyone with experience running a real business in the PRC, Chinese or foreign, doubt that taking such actions would be perceived by the Chinese government as the electronic equivalent of aiding, abetting, and harboring criminals? Is there any question that such actions would likely irritate some fairly senior people in government? Because in a land where rule of law is in its infancy, it would not require a court order to shut the doors of even the largest Internet company. All it would take is for a small number of well-placed regulators or police officials to lose their patience with a company and the axe would fall.

Something, again, that Ms. MacKinnon does not deny. She merely implies “HRW believes” it to be possible to act according to their requirements and still operate in China.

Fair enough. I “believe” she and HRW are wrong. And nether of us will be proven right or wrong until somebody does it. Any volunteers?

Moving the Immovable

My second objection to the report is the document’s implicit conviction that if U.S. companies make a principled stand, somehow they will change the nature of the Chinese government. From the recommendations:

“Lobby and attempt to convince the Chinese government and its officials to end political censorship of the Internet.”

Perhaps it is something in our psyche as Americans that believes that we can change anything if we work hard enough. I was raised to believe that this is an admirable trait. I have come to realize that there is a fine line between conviction and hubris.

With all of the government relations activity that companies engage in, the single most important aspect of that activity is developing an understanding of the broader policy agenda. Despite the misperception that MNC public affairs staffs, agencies, and industry associations actually help form policy in China (suggesting that Beijing operates the same way Capitol Hill does,) the reality is quite different. The only occasions on which companies are able to influence policy is when they are able to align themselves with or help direct politically powerful local interests in their lobbying efforts.

Despite the considerable aggregate value of foreign investment in China, the marginal value of any one company to the nation’s future in 2006 is in decline, and its political power with it. No longer do the nations leaders spend considerable parts of their schedules meeting with CEOs. The nation is awash in foreign cash. It boasts an economy that is growing beyond the most optimistic projections of its reformers. And it is coming to grips with a sobering reality – it has arrived at this place by selling off its best assets, it has created powerful competitors for its own nascent companies, and it still faces intractable economic issues.

Against such a background, the traditional levers wielded by foreign firms in their relationship with the government – the carrot of more investment, greater employment, and technology transfer vs. the stick of taking it all to India or Southeast Asia – are proving too short to move policy. What is worse, the element within government that sees foreigners as increasingly unwelcome interlopers and opportunists is growing. While it is unlikely that such sentiment will spill over into an outburst of anti-neocolonialism, it means that until rule of law is firmly established in China, companies operate in the PRC on the good graces of the government, and whatever levers remain to companies are used sparingly and in the interest of survival.

Can Companies Incite Social Change? Do We Even Want Them To?

This is by no means an issue unique to China or to this moment in history. In his book Empires of Profit: Commerce, Conquest, and Corporate Responsibility, Daniel Litvin debunks the myth that “Multinationals….ruthlessly [manipulate] governments and entire countries in the single-minded quest for profits.”

The myth dies hard, given that it is one of the Great Beliefs of our generation. But in a well-researched, carefully documented analysis that touches on ten cases, Litvin makes a cogent case that corporate influence even in the most corrupt of governance is more illusory than real, a misperception best banished from either NGO analysis or corporate strategy to someplace where it can do some good – pulp fiction.

Litvin’s primary conclusion is that compelling companies to become instruments of social change in the countries in which they operate vastly overestimates the abilities of these companies to bring about change. Social change is not brought about by brute force, whether it is the arms and armaments of the United States armed forces, the petrodollars of Shell Nigeria, or the vast media empire and soft power of News Corporation.

If China must change its ways in censorship, leaving it to the companies would be at best ineffectual, and at worst precipitate unintended consequences that would redound to the detriment of all – conceivably including a backlash against any foreigners and the Internet as a whole.

The burden of proof, as it were, appears now to lie with Ms. MacKinnon and HRW. Before embarking on a campaign to compel companies to change their ways, she is at least obliged to proffer some level of proof that the effort (and likely significant attendant commercial costs) have some chance for success.

To do any less would be disingenuous, as at present in the historical record as well as in the minds of the well-intentioned leaders and shareholders of the four companies she discusses, the likely end result of following her recommendations would be to force U.S. Internet companies out of China. I will give her the benefit of the doubt and assume that this is not her end goal.

Alternative Recommendations

It would be disingenuous of me to conclude without offering up my own solution to the situation. As such, I offer my own preliminary set of recommendations.

I. Companies

A. I agree that every company should operate under a clear code of conduct – what I dispute is a universal code. While there must be common values that underlie all codes of conduct, any code of conduct must be specific to its business, reflecting the fact that every business is unique and each faces its own unique ethical challenges and traps.

B. Companies need to be absolutely transparent with all of their audiences about the ethical challenges they face in China, and should be upfront about how they plan on addressing them. This means being upfront with investors, customers, regulators, and the community at large. At the same time, a company is obliged to be honest about the nature of the challenges it faces in China so that all of its publics are clear about what the company cannot change, what it can, and what it would cost the company to make those changes.

C. Seek coalitions with Chinese companies and entities who for their own reasons share the goals of limiting censorship.

II. Investors – Investors are the most critical force to guide company behavior. Investment in a firm doing business in China cannot be passive – it must be active and all of the hard questions need to be asked. If a company does not behave according to its own code of ethics, an investor is obliged to do all in his power, up to and including divestiture – to convince a company to act according to its own broader interests.

III. Activists and NGOs – Add capable business people to teams developing recommendations to companies to ensure that recommended courses of action are commercially practical as well as ethically correct.

IV. Foundations and Think Tanks – Study ways for the full range of groups and entities to build comfort among policy makers in China with the idea of a free and open Internet.

V. Users, including users in China – Make it clear to the company exactly how much the company’s policies really affect you.

VI. Governments – Provide companies with every opportunity to govern themselves in these matters, stepping in with legislation only when self-governance has failed. When stepping in, ensure that the companies that have made a good faith effort are not penalized along with those who have not.

VII. Business Associations – Provide companies with assistance in establishing codes of conduct, and in supporting the development of independent bodies to assess corporate behavior and compliance.

VIII. In addition, there are recommendations in the HRW report that are worth following, so.

A. Investors should press for ethical company practices and respect for users’ human rights, and should ensure that the company is doing all that is practical to ensure this.

B. Investors should press for a code of conduct and for companies to comply to it.

C. International organizations should study – and monitor – the ways in which non-transparent censorship in China contributes to the lack of a level business playing field and the extent to which censorship should be considered a barrier to trade.

D. Activists should work in concert with socially responsible businesses to develop technologies that will maximize privacy, ensure anonymity, and enable Internet users around the globe to circumvent Internet censorship, filtering, and blocking.

E. NGOs should conduct independent research and documentation of the ways in which companies are or are not complying with legislation and/or codes of conduct.

F. Foundations and NGOs should provide clearing houses of information through which users can better inform themselves about the ways in which the products and services they use may be limiting their universally recognized right to free speech and privacy

The Last Word

Creating a free Internet in China will not happen overnight, and in the end will not be driven by forces from outside of China. Foreigners have but an opportunistic, supporting role to play in the process, a process that is yet unfolding as the domestic news media becomes more assertive in its relationship with the government.

But the first indication that the drive to a free and open Internet is driven by forces outside of China will throw the issue into the laps of the state security apparatus, an event that will destroy the progress made to this point and thrust us back into the dark ages of the early 1990s.

Ms. MacKinnon and HRW should be commended on their report for giving their point of view an articulate outlet, and for keeping this issue on the corporate agenda. Now that they have done so, it is time for the debate over solutions to begin.

The State Administration for Radio, Film, and Television (SARFT) has apparently issued an internal notice to television stations around the country that TV stations will be prohibited from showing foreign cartoons during prime hours of 5–8pm. I say “apparently” because there is nothing on SARFT’s website about this, and it was apparently a tip from Guizhou TV to Wang Shanshan at China Daily that has allowed us to find out about it at all.

We Make It Up On Volume

The move is the latest effort by SARFT to attempt to buoy China’s own struggling animation industry, an effort that in the past has seen the regulator:

• Compel TV stations to use local animation for at least 40% of their animated fare; and

• Build 15 animation incubators around the country.

The net result has been a lot more animation, but by no means better animation. Even China Daily hints at the real problem:

“After all it is creativity, rather than money, that has been lacking in animation in China,” said Xu Jiang, president of the China Academy of Art in Hangzhou, capital of East China’s Zhejiang Province, where dozens of animation production studios have been set up in recent years.

Produced in large quantities, domestic cartoons are sometimes sold at less than 1 per cent of their cost, according to the Xinhua News Agency.

Many local television stations are only willing to pay around 10 yuan (US$1.25) per minute for domestic animation, while buying foreign animations, like Japan’s “Slam Dunk,” for as much as 5,000 yuan (US$625) per minute, said the Xinhua report.

Domestic animations have to first of all become interesting if they are to be popular, according to Yang Yunxia, a Beijing fashion analyst with a four-year-old daughter. “Children are not going to fall in love with something simply because they have no other options,” she said.

Right. Let’s cut to the chase: most Chinese animated content sucks to the point that even kids won’t watch it.

This Is Why They Built Hollywood So Far From Washington

All of that government-driven effort, and all it has done is manage to crank out larger and larger quantities of dreck. It reminds me of looking out the back window in a friend’s apartment in Guangzhou in the early 1990s and seeing a field filled with Peugeot cars nobody wanted to buy. Or of driving past empty lots in Liaoning filled with steel beams of such abysmal quality that the mills couldn’t give them away.

Fast forward, and we’re now at a point where that same factory in Guangzhou is turning out Honda Accords that are rated higher in quality than the Accords coming out of Honda’s plant in Japan (I know – I own one) and China’s steel industry is turning out steel of sufficient quality to be used in automobile panels.

This didn’t happen because of government sponsored programs any more than China’s animation industry will be saved by neo-protectionism and subsidies.

IF the policy makers responsible for the health of the domestic animation industry in China are REALLY concerned about the domestic animation industry (as opposed to, say, being focused solely on securing their sinecures), they’ll recognize that finding ways to drive foreign investment and expertise into the industry are all that can save it at this point.

Who Needs Broadcast?

Something the nabobs have apparently forgotten is that broadcast television is by no means the only way kids can get their hands on foreign (read “decent”) animated content. In fact, for China’s urban kids, it’s probably the least favored of all possible ways of doing so.

Nearly any kid in a major city can get his or her hands on pirated DVDs of almost any animated film and a lot of television content. A growing number of them can get their fix online.

And more and more kids with computers are wandering away from the TV to the more engaging world of either games or other interactive content. Granted, this is a tiny percentage of the audience, but this is also the golden demographic that advertisers want to reach – China’s yuppie puppies.

SARFT may well try to squeeze IPTV and mobile TV, but it will be more difficult for them to do so as these outlets look to be primarily on-demand driven channels. It would take an outright ban on foreign content for keep these new channels from becoming a new way to watch foreign animation, and I’m not sure that SARFT is ready to fight the combined power of the broadcasters, the telcos, and the MII on this issue.

That’s All, Folks

The result will be the same. Instead of creating new markets for Chinese animation, SARFT will wind up chasing kids away or turning them off completely and in the meantime subsidizing a local industry that is incapable of creating content worthy of watching.

China’s broadcasters, who have typically taken the brown end of the stick with these policies, are the ones who will suffer the most. They will lose young viewers now and fail to establish television as a “must imbibe” medium for a critical demographic, hastening the decline of broadcast TV and, frankly, weakening a medium upon which the government relies to help maintain order.

Just a thought – how long is the Party prepared to countenance an industrial policy that weakens the very industry it is supposed to strengthen and at the same time loosens the Party’s grip on the nation?

The Last Word

Professor Liu Jun at the Beijing Film Academy is quoted by the China Daily as having told an industry gathering last year that “the development of the domestic animation industry is important for preserving ancient Chinese civilization because children and teenagers are supposed to learn traditional values from their favourite TV programs.”

I really hope Professor Liu has an exaggerated opinion of the importance of animation to your average Chinese kid. I can only hope he’s incredibly out of touch with reality.

Because if he’s not, and Chinese society has declined to a point where the nation is relying on cartoons to deliver traditional values, then the fault lies not with Mickey Mouse, Bugs Bunny, Pikachu or the Justice League, but with the parents, educators, and leaders who have failed in their duty to pass traditional values onto their children.

I had the rare and humbling honor of sharing a podium with Professor Fan Gang, head of the National Economic Research Institute, at a Singapore confab for Strategic Intelligence about six years ago. He is every bit (and more) the worldly and sophisticated an economist as Steve Green at Standard Chartered gives him credit for being, but he is also extremely engaging, easy to talk to, and as comfortable in a salon full of western businessmen as he is in a hall filled with party cadres.

It is this combination of intellect and social ambidexterity that makes him such a positive addition to the monetary policy committee at the People’s Bank of China. I can only hope this is a stepping stone to a more official position.

If nothing else, China could use his talents to mange the fairly hawkish rhetoric coming out of U.S. Treasury Secretary Henry Paulson’s office. After Snow had backed down a bit, Paulson’s debut in office has been marked by increase demands to adjust the yuan. I think Fan Gang is the kind of economist that can help PBOC and Treasury build a clearer mutual understanding based on the economics rather than the rhetoric, both because he fundamentally agrees with some adjustment, but also because he can clearly and intelligently articulate (in terms U.S. economists would get) why it can’t go any faster.

There’s not a whole lot more to be written about the entire Dell fiasco at this point, except to say that the crisis has occurred and Dell has responded (although as Fons correctly points out, it DID take an article in BusinessWeek to get them to do so.)

Steve Rubel pats Dell on the back for doing a “nice job” responding to user complaints on its blog. If I were him, I’d hold off on the kudos. It is way too early to tell whether or not Dell’s response was adequate, whether it was “too little, too late,” or, as ImageThief and I discussed at lunch yesterday, whether it was even sufficiently culturally sensitive to make a real difference.

Charles Wolf (no relation), an analyst for Still, Needham & Company, says the issue will blow over in a few weeks, and that it might have a “nominal” negative impact on Dell’s reputation in China. I have a lot of respect for Charlie Wolf, but I’d really like to know what he bases that on.

With respect to these esteemed voices, I think they underestimate the severity of the issue. Unlike the part of the planet where they both ply their trades, memories are long here in China, and locals are in no rush to forgive a company that transgresses. This applies double for foreign companies who have viable local competitors. Toshiba was once a leading brand name in laptops in China. Since bungling a similar issue seven years ago, it’s reputation is shot among computer consumers and its business has suffered as a result.

The telling point for Dell here will be how it behaves going forward. It has an opportunity to regain some squandered trust, but it will do so only if it recognizes something Rubel apparently missed – the battle to rebuild its image among China’s increasingly sophisticated, choosy, and nationalistic computer buyers is far from over.